State policy and purpose
- The State policies include fostering the development of the credit card industry as an indispensable tool to make consumer credit readily available to all Filipinos.
- The State must ensure fair and sound consumer credit practices aligned with global best practices.
- The State must promote an efficient payments system and encourage competition and transparency to support more effective credit card services.
- The State must institute appropriate mechanisms to protect and educate credit cardholders (Section 2).
Coverage: who and what is regulated
- The Act governs all credit card issuers, all acquirers, and all credit card transactions (Section 3).
BSP supervision and regulatory powers
- The Bangko Sentral ng Pilipinas (BSP) shall supervise all credit card issuers and acquirers (Section 4).
- Supervision includes:
- issuing rules of conduct and establishing standards of operation for uniform application, and imposing penalties for noncompliance (Section 4[a]);
- conducting examinations as determined by the Monetary Board to determine compliance with laws and regulations (Section 4[b]);
- overseeing compliance with laws and regulations (Section 4[c]);
- determining the reasonableness of fees and charges and issuing regulations on the same (Section 4[d]).
Core definitions for credit card terms
- An “Acceleration clause” is a contractual provision that gives the credit card issuer the right to demand full settlement of the obligation upon default or nonpayment of any amount due or for any valid reason (Section 5[a]).
- An “Acquirer” is the institution that accepts and facilitates the processing of the credit card transaction initially accepted by the merchant (Section 5[b]).
- “Balance transfer” means transfer of the balance in a credit card account to another credit card account (Section 5[c]).
- “Billing cycle/billing period” means the period between billings, with billing cycles comprising at least fifteen (15) days (Section 5[d]).
- A “Card association” is any company providing credit card network, including American Express, VISA International, MasterCard International, JCB International, Diners Club, and China Union Pay (Section 5[e]).
- “Cash advances” are cash obtained from the credit card account in any manner availed by the cardholder (Section 5[f]).
- A “Credit card” is any card or other credit device intended for obtaining money, property, or services on credit (Section 5[g]).
- A “Credit card issuer” is a bank or corporation that offers the use of its credit card (Section 5[h]).
- “Credit card limit” is the maximum total amount for purchases, cash advances, balance transfers, and finance charges, service fees, penalties, and other charges that can be charged to the credit card (Section 5[i]).
- “Default or delinquency” is nonpayment, or payment less than the minimum amount due or minimum payment required, for at least three (3) billing cycles (Section 5[j]).
- “Finance charges” are interest charged to the cardholder on all credit card transactions in accordance with the card agreement (Section 5[k]).
- “Installment purchases” are transactions where payment is amortized in parts over a fixed period (Section 5[l]).
- An “Industry association” is an association composed of companies engaged in banking, finance, credit and payments (Section 5[m]).
- “Membership fee” is the amount levied by an issuer for the right to use the credit card and acquire access to membership benefits, also referred to as annual membership fee/annual fee/joining fee/application fee (Section 5[n]).
- “Minimum amount due or minimum payment required” is the minimum the cardholder must pay on or before the due date, and includes:
- outstanding balance multiplied by the required payment percentage or a fixed amount, whichever is higher;
- any amount that is part of any fixed monthly installment charged to the card;
- any amount in excess of the credit line; and
- all past due amounts (Section 5[o]).
- “Outstanding balance” is the amount to be repaid as of the statement cut-off date (Section 5[p]).
- “Statement cut-off date” is the end date of a billing cycle as determined by the credit card issuer when account activities are summarized (Section 5[q]).
- “Statement of account or billing statement” is the regular statement listing purchases, payments, and other debits and credits within the billing cycle (Section 5[r]).
- A “Supplementary card or extension card” is a credit card issued to another person whose credit limit is consolidated with the primary cardholder’s credit limit (Section 5[s]).
Risk management and credit card issuance rules
- Every credit card issuer and acquirer must establish an appropriate risk management system to manage risk exposures arising from credit card operations (Section 6).
- The risk management system must be documented in a complete and concise manner and must cover:
- organizational setup for credit card engagement or unit handling;
- information management system;
- accounting policies and procedures;
- internal and external functions; and
- internal control system (Section 6).
- Before issuing credit cards, issuers must conduct know your-client (KYC) procedures and exercise proper diligence to ascertain that applicants have good credit standing and are financially capable of fulfilling credit commitments (Section 7).
Merchant due diligence and purchase verification
- Service level agreements between acquiring banks and partner merchants must include a provision requiring merchants to perform due diligence to establish the identity of cardholders (Section 8).
- Issuers may verify or seek confirmation with the cardholder any purchase if, based on their assessment, there is reasonable concern as to the validity of the purchase (Section 8).
Credit limit setting, changes, and notice
- Issuers must determine the credit limit based on the cardholder’s credit standing and financial capacity (Section 9).
- Issuers may implement credit limit changes based on their risk management policies and guidelines (Section 9).
- The cardholder must be notified of credit limit changes (Section 9).
- The cardholder may decline any credit limit increase (Section 9).
- The cardholder has the option to request a credit limit adjustment subject to approval by the credit card issuer (Section 9).
Finance charges and late-payment calculations
- Finance charges and other fees arising from nonpayment in full or on time of the outstanding balance must be based on the unpaid amount of the outstanding balance (Section 10).
Mandatory disclosures to cardholders
- Issuers must disclose to all cardholders and potential cardholders:
- finance charges for unpaid amounts after the payment due date (Section 11[a]);
- the interest percentage as a simple monthly or annual rate (as applicable) on the outstanding balance of the obligation (Section 11[b]);
- default, late payment/penalty fees, or similar delinquency-related charges in the event of late payments (Section 11[c]).
- Late payment fees or penalties for late payment must be based on the unpaid minimum amount due or a prescribed minimum fixed amount, whichever is lower (Section 11[c]).
- Late payment fees may be based on the total outstanding balance including amounts payable under installment terms or deferred payment schemes if the card agreement contains an acceleration clause and the total outstanding balance is classified and reported as past due (Section 11[c]).
- Issuers must also disclose the method of:
- determining the balance on which interest and/or delinquency charges may be imposed (Section 11[d]);
- determining the amount of interest and/or delinquency charges, including any minimum or fixed amounts imposed (Section 11[e]).
- Issuers must disclose other fees, including membership/renewal fees, processing fees, over-the-limit fees, collection fees, credit investigation fees, and attorney’s fees (Section 11[f]).
- Issuers must disclose the manner of conversion from transaction currency and payment currency to Philippine pesos or billing currency for foreign-currency transactions, dual currency accounts (peso and dollar billings), and payments made in a currency other than billing currency, which may be a definition or general description of conversion rates (Section 11[g]).
- Issuers must print a written reminder in the billing statement (or equivalent document) stating:
“Important Reminder: Paying less than the total amount due will increase the amount of interest you pay and the time it takes to repay your balance” (Section 11[h]). - Issuers must disclose any other information that may be required by the BSP (Section 11[i]).
- Issuers must endeavor to convey required information in a manner understandable to cardholders (Section 11).
- The enumerated items may be included in a billing statement on a quarterly basis at the minimum in tabular format (Section 11).
Computation disclosure and BSP implementation
- Issuers must provide, to the extent practicable, a detailed explanation and a clear illustration of how all charges and fees are computed (Section 12).
- The BSP must determine the implementation date for this computation disclosure requirement (Section 12).
Changes in computations and fees notice and termination
- Issuers must notify cardholders at least ninety (90) days prior to any change in the manner of computation of the outstanding balance and the amount of fees to be imposed (Section 13).
- If the cardholder finds the change unacceptable, the cardholder has the right to terminate the account subject to Section 25 (Section 13).
- Compliance with this notice requirement may be deferred for a reasonable time that the BSP determines for system modifications by credit card issuers (Section 13).
Over-the-limit transactions and disclosure
- If a cardholder breaches the credit limit by a new transaction, the transaction may be processed subject to the discretion of the credit card issuer (Section 14).
- Any fees for such over-the-limit transactions must be clearly and prominently disclosed in the table of fees and charges (Section 14).
Lost or stolen card liability rule
- If a credit card is lost or stolen, any transaction made prior to reporting to the issuer is for the account of the cardholder (Section 15).
Confidentiality obligations and permitted disclosures
- Credit card issuers and their officers, employees, and agents must keep strictly confidential cardholder data, except under permitted circumstances (Section 16).
- Disclosure is allowed with:
- the cardholder’s consent (Section 16[a]);
- release, submission, or exchange with credit information bureaus, industry associations, or card associations (Section 16[b]);
- court orders of competent jurisdiction or orders of government offices or agencies authorized by law, or under conditions prescribed by the BSP (Section 16[c]);
- disclosure to third-party service providers necessary solely to assist or render services to enforce rights against the cardholder (Section 16[d]);
- disclosure to insurance companies solely to insure the issuer against cardholder default or other credit loss, and to insure the cardholder from fraud or unauthorized charges (Section 16[e]);
- disclosure to third parties for investigating fraud or unauthorized activities or mitigating risk involving card issuance, use and acquiring (Section 16[f]).
- Recipients of confidential information under these circumstances must also preserve confidentiality of cardholder data (Section 16).
Customer assistance and dispute handling
- Every card issuer must establish a customer assistance unit responsible for prompt action for expeditious resolution of complaints, inquiries, and requests (Section 17).
- For billing errors or discrepancies, cardholders have up to thirty (30) calendar days from statement date to report any error or discrepancy (Section 18).
- The issuer must take action within ten (10) business days from receipt of such notice (Section 18).
Debt collection conduct, harassment ban, and BSP rules
- Issuers may resort to all reasonable and legally permissible means to collect amounts due under the credit card agreement (Section 19).
- In exercising rights and duties, issuers must observe good faith, reasonable conduct, proper decorum, and must refrain from unscrupulous acts (Section 19).
- Issuers or collection agents must not harass, abuse, or oppress any person or engage in unfair practices as may be defined by BSP rules and regulations in connection with collection of credit card debt (Section 19).
Use of collection agents
- Issuers may engage qualified third-party service providers/collection agents to assist in administration, including recovery of unpaid obligations and enforcement of rights against cardholders (Section 20).
Notice and limits on collection agency endorsements
- Before actual endorsement, issuers must inform the cardholder in writing of:
- endorsement of the collection of the account to a collection agency; or
- endorsement of the account from one collection agency to another (Section 21).
- The written notice must include the full name of the collection agency and its contact details (Section 21).
- The requirement to notify in writing must be included in the terms and conditions of the credit card agreement (Section 21).
- An issuer must refer collection of an account to only one collection agency at any one time (Section 21).
Collection communications
- Issuers or collection agencies may communicate with cardholders in connection with collection of debt through modes or modes prescribed by the BSP in guidelines for this purpose (Section 22).
Due date rule for weekends and holidays
- If the payment due date falls on weekends and regular national holidays, the due date automatically moves to the next business day (Section 23).
- Payment through any authorized mode made to accredited payment centers of the issuer is considered payment to the issuer on the same date (Section 23).
How issuer must apply payments
- Upon receipt of a payment from a cardholder with different interest rates for different types of purchases (cash advances, regular purchases, balance transfers), the issuer must apply amounts in excess of the minimum payment amount:
- first to fees and charges;
- then to the billed balance bearing the highest rate of interest;
- then to the billed balance bearing the next higher rate of interest;
- until the payment is exhausted (Section 24).
- The original rates for promotional offers govern the hierarchy of payment (Section 24).
Account termination rights and payment structure
- A cardholder may cancel or terminate the account anytime (Section 25).
- Termination requires that the cardholder either:
- pays in full; or
- enters into another agreement for payment of the outstanding balance, where new purchases, debits, and deferred installments may be made either through a one-time payment or installments within a fixed period of time (Section 25).
- Repayment in installments is generally subject to interest unless there is a violation of the new agreement (Section 25).
Administrative sanctions for credit card issuers
- Section 37 of Republic Act No. 7653 (the New Central Bank Act) applies to any credit card issuer, acquirer, and their directors and officers for administrative sanctions arising from willful violation of the Act or related BSP rules, regulations, orders, or instructions (Section 26).
- Administrative sanctions apply without prejudice to criminal sanctions for culpable persons under Section 25 of this Act (Section 26).
- In addition to administrative sanctions, the BSP may suspend or cancel the authority of a credit card issuer to issue credit cards (Section 26).
Criminal penalties for willful violations
- A person who willfully violates any provision of this Act or related BSP rules, regulations, orders, or instructions is punished by:
- imprisonment of not less than two (2) years nor more than ten (10) years; or
- a fine of not less than fifty thousand pesos (P50.000.00) but not more than two hundred thousand pesos (P200,000.00); or both, at the discretion of the court (Section 27).
Transitory compliance for existing unsupervised issuers
- Existing credit card companies not supervised by the BSP are given such reasonable time as the Monetary Board may determine to comply with applicable rules and regulations (Section 28).
Separability and repealing rules
- If any provision or section is held unconstitutional or invalid, the remaining provisions continue in full force and effect (Section 29).
- All laws, decrees, executive orders, proclamations, and administrative regulations, or parts inconsistent with the Act are repealed or modified accordingly (Section 30).